A sudden drop in global gasoline prices over the past two weeks has hurt refinery profits, pushing up inventories in major trading centers around the world, while looming exports from the China and gives Índia they also increase pressure on growing inventories.
With global gasoline prices falling, refiners will be forced to cut production to protect against losses and switch to more profitable fuels, traders say.
But summer demand is also being hampered by high pump prices in the US and Europe and by the instability and reduction of seasonal demand in parts of Asia.
This has led to an increase in gasoline inventories from Singapore to Amsterdam, Rotterdam, Antwerp and the United States, according to traders, analysts and inventory data.
Asia's largest fuel exporter, Taiwan's Formosa Petrochemical Corp, could reduce operating rates at its residual fluid catalytic cracking units, which are now operating at full capacity, by 5% in the coming weeks.
“We are going to sell more low sulfur fuel oil because the margins are better,” Formosa spokesman KY Lin told Reuters.
VLSFO can be used as a feedstock for RFCC units to produce gasoline or sold as marine fuel.
Gasoline margins in Asia fell more than 102% in July, at a $0.14 cents a barrel discount to Brent crude, after hitting a record $38.05 a barrel premium in June, showed. Refinitiv data.
Margins are also at the lowest level for this time of year since at least 2000.
That depressed Asian refining margins to $0.88 cents a barrel on Dubai crude on Monday, down from a record $30.49 in June.
Chinese state-owned refiners are expected to ramp up refinery operations in August and September and boost exports to reduce high domestic inventories after receiving new quotas, industry sources say.
Meanwhile, first-half July gasoline imports to Asia fell by 240,000 tonnes from second-half June levels, led by declines in Indonesia, Asia's biggest gasoline importer, FGE said in a note.
FGE expects Asian gasoline demand, excluding China, to improve only marginally between July and September, averaging 80,000 bpd below levels seen in the same period in 2019, as high retail prices weigh on demand. .
In the United States, gasoline products totaled about 8.5 million bpd, or about 7.6% less than the same period last year, government data show.
So-called crack 321, a proxy for refining margins, fell to the lowest level in more than three months at $37.57 a barrel last week, down from all-time highs of nearly $60 in June, but still well above seasonal levels.
Meanwhile, spot gasoline prices at the Port of New York dropped to $3.35 in mid-July from $4.43 a gallon in June, traders say.
In Europe, traffic information from TomTom, the navigation data group, suggests that urban fuel demand has started to fall.
Sources: investing.com
